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Mphasis Ltd.

BSE: 526299 Sector: IT
NSE: MPHASIS ISIN Code: INE356A01018
BSE 00:00 | 30 Jul 2597.60 -70.50
(-2.64%)
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NSE 00:00 | 30 Jul 2599.75 -69.85
(-2.62%)
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OPEN 2684.00
PREVIOUS CLOSE 2668.10
VOLUME 33723
52-Week high 2692.35
52-Week low 1001.85
P/E 39.94
Mkt Cap.(Rs cr) 48,637
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 2684.00
CLOSE 2668.10
VOLUME 33723
52-Week high 2692.35
52-Week low 1001.85
P/E 39.94
Mkt Cap.(Rs cr) 48,637
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Mphasis Ltd. (MPHASIS) - Auditors Report

Company auditors report

To the Members of Mphasis Limited

Report on the Audit of the Standalone Financial Statements

Opinion

We have audited the standalone financial statements of Mphasis Limited (‘theCompany') which comprise the standalone balance sheet as at 31 March 2020 the standalonestatement of profit and loss (including other comprehensive income) standalone statementof changes in equity and standalone statement of cash flows for the year then ended andnotes to the standalone financial statements including a summary of the significantaccounting policies and other explanatory information (hereinafter referred to as‘the standalone financial statements').

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Companies Act 2013 (‘the Act') in the manner so required and give a true andfair view in conformity with the accounting principles generally accepted in India of thestate of affairs of the Company as at 31 March 2020 profit and other comprehensiveincome changes in equity and its cash flows for the year then ended.

Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Act. Our responsibilities under those SAs are furtherdescribed in the Auditor's Responsibilities for the Audit of the Standalone FinancialStatements section of our report. We are independent of the Company in accordance with theCode of Ethics issued by the Institute of Chartered Accountants of India together with theethical requirements that are relevant to our audit of the standalone financial statementsunder the provisions of the Act and the Rules thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the Code of Ethics. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our opinion on the standalone financial statements.

Key Audit Matters

Key audit matters (‘KAM') are those matters that in our professional judgmentwere of most significance in our audit of the standalone financial statements of thecurrent period. These matters were addressed in the context of our audit of the standalonefinancial statements as a whole and in forming our opinion thereon and we do not providea separate opinion on these matters.

Description of Key Audit Matters

The key audit matter How the matter was addressed in our audit
Adoption of Ind AS 116 Leases
As described in Note 2 to the standalone financial statements during the current year the Company has adopted Ind AS 116 Our audit procedures on adoption of Ind AS 116 include the following:
Leases (‘Ind AS 116') the new standard on lease accounting. The application and transition to this accounting standard is complex and is an area of focus in our audit as the Company has a large number of leases with different contractual terms. • Evaluated the design and implementation of the processes and internal controls relating to implementation of the new lease standard.
Ind AS 116 introduces a new lease accounting model wherein lessees are required to recognize a right-of-use (ROU) asset and a lease liability arising from a lease on its balance sheet. The lease liabilities are initially measured by discounting future lease payments during the lease term as per the contract/ arrangement. • Based on our evaluation of the contractual agreements entered into and our knowledge of the business assessed the appropriateness of the leases identified by the Company.
Adoption of the standard involves significant judgements and estimates including determination of the discount rates and the lease term. • Involved our internal valuation specialists to evaluate the reasonableness of the discount rates used in computing the lease liabilities.
The Company adopted the modified retrospective approach method to transition to Ind AS 116 consequently comparative financial information was not restated. • On transition to Ind AS 116 with effect from 1 April 2019:
• Evaluated the method of transition and related adjustments.
• Tested completeness of the lease data by reconciling the Company's operating lease commitments as at 31 March 2019 to data used in computing the ROU asset and related lease liabilities.
Additionally the standard mandates detailed disclosures with respect of transition. Refer Note 2 and Note 4 to the standalone financial statements. • Selected samples using the statistical sampling approach. For such samples selected we assessed the key terms and conditions of each lease with the underlying lease contracts evaluated computation of lease liabilities and challenged the key estimates such as discount rates and the lease term.
• For new/modified leases tested the lease accounting and estimates/ judgments used by the Company.
• Evaluated the appropriateness of the accounting policy disclosures provided under the new lease standard and assessed the completeness and mathematical accuracy of the relevant disclosures including those related to transition.
Evaluation of tax positions
The Company operates in India and is subject to periodic challenges by local tax authorities on a range of tax matters during the normal course of business including direct tax transfer pricing and indirect tax matters. Estimating the income tax expense also requires the Company to determine the probability of tax authorities accepting a particular tax treatment for potential tax exposures. These involve significant judgment by the Company to determine the possible outcome of the tax litigations and potential tax exposures consequently having an impact on related accounting and disclosures in the financial statements. Our audit procedures include the following substantive procedures:
• Obtained an understanding of key tax litigations and potential tax exposures.
• The audit team along with our internal tax experts:
• read and analyzed select key correspondences and consultations carried out by the Company including with external tax experts for key tax litigations and potential tax exposures.
Refer Note 22 and Note 30 to the standalone financial statements. • discussed with appropriate senior management evaluated and challenged key assumptions and grounds of appeal considered by the Company in estimating the current and deferred tax balances.
• evaluated the status of the recent tax assessments/inquiries results of previous tax assessments legal precedence/judicial rulings and changes in the tax environment to assess and challenge the Company's estimate of the possible outcome of key tax litigations and potential tax exposures.
• assessed and tested the presentation and disclosures in the standalone financial statements relating to taxes.

Other Information

The Company's management and Board of Directors are responsible for the otherinformation. The other information comprises the information included in the Company'sannual report but does not include the standalone financial statements and our auditors'report thereon.

Our opinion on the standalone financial statements does not cover the other informationand we do not express any form of assurance conclusion thereon.

In connection with our audit of the standalone financial statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the standalone financial statements or our knowledgeobtained in the audit or otherwise appears to be materially misstated. If based on thework we have performed we conclude that there is a material misstatement of this otherinformation we are required to report that fact. We have nothing to report in thisregard.

Management's and Board of Directors' Responsibility for the Standalone FinancialStatements

The Company's management and Board of Directors are responsible for the matters statedin section 134(5) of the Act with respect to the preparation of these standalone financialstatements that give a true and fair view of the state of affairs profit/loss (includingother comprehensive income) changes in equity and cash flows of the Company in accordancewith the accounting principles generally accepted in India including the IndianAccounting Standards (Ind AS) specified under section 133 of the Act. This responsibilityalso includes maintenance of adequate accounting records in accordance with the provisionsof the Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and designimplementation and maintenance of adequate internal financial controls that were operatingeffectively for ensuring the accuracy and completeness of the accounting records relevantto the preparation and presentation of the standalone financial statements that give atrue and fair view and are free from material misstatement whether due to fraud or error.

In preparing the standalone financial statements management and Board of Directors areresponsible for assessing the Company's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless management and the Board of Directors either intend toliquidate the Company or to cease operations or has no realistic alternative but to doso.

The Board of Directors is also responsible for overseeing the Company's financialreporting process.

Auditor's Responsibilities for the Audit of the Standalone Financial Statements

Our objectives are to obtain reasonable assurance about whether the standalonefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these standalone financial statements.

As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the standalonefinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.

• Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143(3)(i)of the Act we are also responsible for expressing our opinion on whether the Company hasin place adequate internal financial controls with reference to standalone financialstatements and the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management and Board of Directorsin the standalone financial statements.

• Conclude on the appropriateness of management's and Board of Director's use ofthe going concern basis of accounting and based on the audit evidence obtained whether amaterial uncertainty exists related to events or conditions that may cast significantdoubt on the Company's ability to continue as a going concern. If we conclude that amaterial uncertainty exists we are required to draw attention in our auditor's report tothe related disclosures in the standalone financial statements or if such disclosures areinadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor's report. However future events or conditions maycause the Company to cease to continue as a going concern.

• Evaluate the overall presentation structure and content of the standalonefinancial statements including the disclosures and whether the standalone financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.

We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.

From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the standalone financial statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditors' report unless law or regulation precludes public disclosure about thematter or when in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditors' Report) Order 2016 ("the Order")issued by the Central Government of India in terms of section 143(11) of the Act we givein the "Annexure A" a statement on the matters specified in paragraphs 3 and 4of the Order to the extent applicable.

(A) As required by Section 143(3) of the Act we report that:

(a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit.

(b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books.

(c) The standalone balance sheet the standalone statement of profit and loss(including other comprehensive income) the standalone statement of changes in equity andthe standalone statement of cash flows dealt with by this Report are in agreement with thebooks of account.

(d) In our opinion the aforesaid standalone financial statements comply with the IndAS specified under section 133 of the Act.

(e) On the basis of the written representations received from the directors as on 31March 2020 taken on record by the Board of Directors none of the directors isdisqualified as on 31 March 2020 from being appointed as a director in terms of section164(2) of the Act.

(f) With respect to the adequacy of the internal financial controls with reference tostandalone financial statements of the Company and the operating effectiveness of suchcontrols refer to our separate Report in "Annexure B".

(B) With respect to the other matters to be included in the Auditors' Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations as at 31 March 2020 onits financial position in its standalone financial statements-Refer Note 30 to thestandalone financial statements.

ii. Provision has been made in the standalone financial statements as required underthe applicable law or Ind AS for material foreseeable losses on long-term contractsincluding derivative contracts. Refer Note 16 to the standalone financial statements.

iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.

iv. The disclosures in the standalone financial statements regarding holdings as wellas dealings in specified bank notes during the period from 8 November 2016 to 30 December2016 have not been made in these standalone financial statements since they do not pertainto the financial year ended 31 March 2020.

(C) With respect to the matter to be included in the Auditors' Report under section197(16) of the Act

In our opinion and according to the information and explanations given to us theremuneration paid by the Company to its directors during the current year is in accordancewith the provisions of section 197 of the Act. The remuneration paid to any director isnot in excess of the limits laid down under section 197 of the Act. The Ministry ofCorporate Affairs has not prescribed other details under section 197(16) of the Act whichare required to be commented upon by us.

for B S R & Co. LLP
Chartered Accountants
Firm's Registration No: 101248W/W-100022
Amit Somani
Bengaluru Partner
13 May 2020 Membership No: 060154
UDIN: 20060154AAAAFV3545

Annexure A to the Independent Auditors' Report

With reference to the Annexure A referred to in the Independent Auditors' Report to themembers of the Company on the standalone financial statements for the year ended 31 March2020 we report the following:

(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of property plant and equipment.

(b) The Company has a regular programme of physical verification of its property plantand equipment by which all property plant and equipment are verified in a phased mannerover a period of three years. In our opinion this periodicity of physical verification isreasonable having regard to the size of the Company and the nature of its assets. Pursuantto the programme certain property plant and equipment were physically verified duringthe year and no material discrepancies were noticed on such verification.

(c) According to the information and explanations given to us the Company does nothave any immovable properties. Accordingly paragraph 3(i)(c) of the Order is notapplicable to the Company.

In respect of immovable properties taken on lease and disclosed as right-of-use-assetsin the standalone financial statements the lease agreements are in the name of theCompany.

(ii) The Company is a service company and accordingly it does not hold any physicalinventories. Accordingly paragraph 3(ii) of the Order is not applicable to the Company.

(iii) According to the information and explanations given to us the Company has notgranted any loans secured or unsecured to companies firms limited liabilitypartnerships or other parties covered in the register maintained under section 189 of theAct. Accordingly the provisions of paragraph 3(iii) (a) (b) and (c) of the Order are notapplicable to the Company.

(iv) In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of sections 185 and 186 of the Act whereapplicable with respect to the loans given investments made guarantees and securitiesgiven.

(v) The Company has not accepted any deposits from the public within the meaning of thedirectives issued by the Reserve Bank of India provisions of sections 73 to 76 of theAct any other relevant provisions of the Act and the relevant rules framed thereunder.

(vi) The Central Government has not prescribed the maintenance of cost records undersection 148 of the Act for any of the services rendered by the Company.

(vii) (a) According to the information and explanations given to us and on the basis ofour examination of the records of the Company amounts deducted/ accrued in the books ofaccount in respect of undisputed statutory dues including Provident fund Employees' StateInsurance Income-tax Goods and Services tax Duty of Customs Cess and any otherstatutory dues have generally been regularly deposited during the year by the Company withthe appropriate authorities. As explained to us the Company did not have any dues onaccount of Duty of excise and Sales tax.

(b) According to the information and explanations given to us no undisputed amountspayable in respect of Provident fund Employees' State Insurance Income-tax Goods andServices tax duty of Customs Cess and any other material statutory dues were in arrearsas at 31 March 2020 for a period of more than six months from the date they becamepayable.

(c) According to the information and explanations given to us there are no dues ofIncome-tax or Sales tax or Service tax or Goods and Services tax or Duty of Customs orDuty of Excise or Value added tax which have not been deposited by the Company on accountof disputes except for the following:

Name of the statue Nature of dues Amount* (Rs. in millions) Period to which the amount relates (Financial Year) Forum where dispute is pending
Income Tax Act 1961 Income tax 3950.70 2004-05 2006-07 2008-09 2009-10 2012-13 and 2013-14 Income Tax Appellate Tribunal
3188.03 2009-10 2010-112011-12 2014-15 and 2016-17 Commissioner of Income Tax Appeals
365.99 2000-01 to 2005-06 Supreme Court
Income Tax Act 1961 Withholding taxes 4956.63 2005-06 to 2011-12 Income Tax Appellate Tribunal
1933.40 2012-13 2013-14 and 2014-15 Commissioner of Income Tax Appeals
3.37 1999-00 to 2001-02 Supreme Court
Finance Act 1994 Service tax 147.51 2004-05 to 2008-09 CESTAT Karnataka
18.74 October 2011 to March 2015 Commissioner (Appeals) Karnataka
Karnataka Value Added Tax Act 2003 Sales tax 0.73 2015-16 Assistant commissioner of Commercial Taxes Karnataka
Tennessee Sales and Use Tax Regulations USA Sales and Use Tax 428.49 December 2011 to April 2015 Department of Revenue Tennessee

* Net of amounts paid under protest amounting to Rs. 2643.86 million.

(viii) In our opinion and according to the information and explanations given to usthe Company has not defaulted in the repayment of loans or borrowings to banks. TheCompany did not have any outstanding loans or borrowings from financial institutions orGovernment and there are no dues to debenture holders during the year.

(ix) In our opinion and according to the information and explanations given to us theCompany did not raise any money by way of initial public offer or further public offer(including debt instruments) and term loans during the year. Accordingly paragraph 3(ix)of the Order is not applicable to the Company.

(x) To the best of our knowledge and according to the information and explanationsgiven to us no material fraud by the Company or on the Company by its officers oremployees has been noticed or reported during the course of our audit.

(xi) In our opinion and according to the information and explanations given to us andbased on examination of the records of the Company the Company has paid/providedmanagerial remuneration in accordance with the requisite approvals mandated by theprovisions of section 197 read with Schedule V to the Act.

(xii) According to the information and explanations given to us in our opinion theCompany is not a Nidhi Company as prescribed under section 406 of the Act. Accordinglyparagraph 3(xii) of the Order is not applicable to the Company.

(xiii) According to the information and explanations given to us and based on ourexamination of the records of the Company all transactions with the related parties arein compliance with sections 177 and 188 of the Act where applicable and details of suchtransactions have been disclosed in the standalone financial statements as required by theapplicable accounting standards.

(xiv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year. Accordingly paragraph 3(xiv) of the Order is not applicable to the Company.

(xv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into non-cashtransactions with directors or persons connected with him. Accordingly paragraph 3(xv) ofthe Order is not applicable to the Company.

(xvi) According to the information and explanations given to us the Company is notrequired to be registered under section 45-IA of the Reserve Bank of India Act 1934.

for B S R & Co. LLP
Chartered Accountants
Firm's Registration No: 101248W/W-100022
Amit Somani
Bengaluru Partner
13 May 2020 Membership No: 060154
UDIN: 20060154AAAAFV3545

Annexure B to the Independent Auditors' report on the standalone financial statementsof Mphasis Limited

Report on the internal financial controls with reference to the aforesaid standalonefinancial statements under Clause (i) of Sub-section 3 of Section 143 of the CompaniesAct 2013

(Referred to in paragraph 1(A)(f) under ‘Report on Other Legal and RegulatoryRequirements' section of our report of even date)

Opinion

We have audited the internal financial controls with reference to standalone financialstatements of Mphasis Limited ("the Company") as of 31 March 2020 in conjunctionwith our audit of the standalone financial statements of the Company for the year thenended.

In our opinion the Company has in all material respects adequate internal financialcontrols with reference to standalone financial statements and such internal financialcontrols were operating effectively as at 31 March 2020 based on the internal financialcontrols with reference to standalone financial statements criteria established by theCompany considering the essential components of internal control stated in the GuidanceNote on Audit of Internal Financial Controls Over Financial Reporting issued by theInstitute of Chartered Accountants of India (the "Guidance Note").

Management's Responsibility for Internal Financial Controls

The Company's management and the Board of Directors are responsible for establishingand maintaining internal financial controls based on the internal financial controls withreference to standalone financial statements criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Note.These responsibilities include the design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the orderly andefficient conduct of its business including adherence to the Company's policies thesafeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under the Companies Act 2013 (hereinafterreferred to as "the Act").

Auditors' Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to standalone financial statements based on our audit. Weconducted our audit in accordance with the Guidance Note and the Standards on Auditingprescribed under section 143(10) of the Act to the extent applicable to an audit ofinternal financial controls with reference to standalone financial statements. ThoseStandards and the Guidance Note require that we comply with ethical requirements and planand perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls with reference to standalone financial statements were established andmaintained and whether such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls with reference to standalone financial statements andtheir operating effectiveness. Our audit of internal financial controls with reference tostandalone financial statements included obtaining an understanding of such internalfinancial controls assessing the risk that a material weakness exists and testing andevaluating the design and operating effectiveness of internal control based on theassessed risk. The procedures selected depend on the auditor's judgement including theassessment of the risks of material misstatement of the standalone financial statementswhether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls withreference to standalone financial statements.

Meaning of Internal Financial Controls with Reference to Standalone FinancialStatements

A company's internal financial controls with reference to standalone financialstatements is a process designed to provide reasonable assurance regarding the reliabilityof financial reporting and the preparation of standalone financial statements for externalpurposes in accordance with generally accepted accounting principles. A company's internalfinancial controls with reference to standalone financial statements include thosepolicies and procedures that (1) pertain to the maintenance of records that in reasonabledetail accurately and fairly reflect the transactions and dispositions of the assets ofthe company; (2) provide reasonable assurance that transactions are recorded as necessaryto permit preparation of standalone financial statements in accordance with generallyaccepted accounting principles and that receipts and expenditures of the company arebeing made only in accordance with authorisations of management and directors of thecompany; and (3) provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition use or disposition of the company's assets that could have amaterial effect on the standalone financial statements.

Inherent Limitations of Internal Financial Controls with Reference to StandaloneFinancial Statements

Because of the inherent limitations of internal financial controls with reference tostandalone financial statements including the possibility of collusion or impropermanagement override of controls material misstatements due to error or fraud may occurand not be detected. Also projections of any evaluation of the internal financialcontrols with reference to standalone financial statements to future periods are subjectto the risk that the internal financial controls with reference to standalone financialstatements may become inadequate because of changes in conditions or that the degree ofcompliance with the policies or procedures may deteriorate.

for B S R & Co. LLP
Chartered Accountants
Firm's Registration No: 101248W/W-100022
Amit Somani
Partner
Bengaluru Membership No: 060154
13 May 2020 UDIN: 20060154AAAAFV3545